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Moreno, Cherrie May C

BSBM 3FM1

Ms. J. Viado

EXPANSIONARY MONETARY POLICY

Reuters

THU MAR 7, 2019

Philippines central bank governor sees opportunity to ease monetary policy

Bangko Sentral ng Pilipinas Governor Benjamin Diokno also said that there is an opportunity to further
reduce banks' reserve requirement ratio, which he said is still too high.

The central bank cut banks' required reserves twice last year to 18 percent, to help bolster the slowing
economy and in line with a medium term plan to bring it to single digit levels.

The annual inflation rate moved back inside the central bank's 2-4 percent target in February when it
eased to a one-year low of 3.8 percent, but year-to-date inflation of 4.1 percent is still outside that
range.

Before he was officially sworn into office, Diokno said on Wednesday he will study "expediting" a cut in
the amount of cash that banks have to hold as reserves. He also said that inflation could fall to 2
percent, the bottom of the central bank's target range - as early as the third quarter, due to base effects.

Diokno's selection comes as the central bank is trying to strike a balance between supporting growth,
which fell short of the government's downwardly revised target last year, and defusing inflationary risks.

The Philippines is one of Asia's fastest growing economies, but policymakers had to grapple with soaring
inflation last year that pushed the central bank to raise its policy rate by a total 175 basis points to 4.75
percent.

CONTRACTIONARY MONETARY POLICY


Rapler (May 10, 2018)

Bangko Sentral ng Pilipinas hikes interest rates for first time since 2014

For the first time in over 3 years, the Bangko Sentral ng Pilipinas (BSP) lifted the benchmark interest rate
to 3.25% in a bid to help the economy withstand rising inflation and the weakening peso.

The central bank's Monetary Board on Thursday, May 10, decided to increase the interest rate on the
BSP's overnight reverse repurchase (RRP) facility by 25 basis points to 3.25%. The interest rates on the
overnight lending and deposit facilities were raised accordingly.

"In deciding to raise the policy interest rate, the Monetary Board noted that latest forecasts have further
shifted higher, indicating that inflation pressures could become more broad-based over the policy
horizon," BSP Governor Nestor Espenilla Jr said in a statement on Thursday, May 10.

"While inflation momentum has started to slow down, inflation may still breach the inflation target
range of 2% to 4% for 2018, primarily due to temporary supply-side factors. Nevertheless, inflation is
expected to return inside the target range in 2019," Espenilla said.